Asked by Mahmoud Saleh on Jul 06, 2024
Verified
Unintended inventory changes
A) precipitate explosive inflations of highly unstable stagflation.
B) are less important in Keynesian than in classical models.
C) ensure that planned saving is always equal to planned investment.
D) are signals to business firms to increase or cut production.
Unintended Inventory Changes
Variations in stock levels that occur when actual sales differ from anticipated sales, not resulting from planned actions by businesses.
Keynesian Models
Economic theories that emphasize the total spending in the economy and its effects on output and inflation, developed by John Maynard Keynes.
Planned Investment
Expenditures that businesses intend to make in the future for new capital assets, such as buildings and machinery, to increase production capabilities.
- Recognize the variables responsible for variations in aggregate demand and supply and their consequences on the economic environment.
Verified Answer
AJ
Angie JimenezJul 10, 2024
Final Answer :
D
Explanation :
Unintended inventory changes serve as signals to business firms to either increase or decrease production. If inventories increase unexpectedly, it indicates that production should be decreased. On the other hand, if inventories decrease unexpectedly, it indicates that production should be increased. This is an important concept in business cycle theory and macroeconomic forecasting.
Learning Objectives
- Recognize the variables responsible for variations in aggregate demand and supply and their consequences on the economic environment.